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SSB – Aug 2019

Source: http://www.amosang.com/singapore-savings-bonds-ssb-visualizer/

This month’s SSB rates are indicated by the brown line, which comes in at 1.68% p.a. for the first 3 years. It’s a rather startling drop of 20 bps from last month! For comparison, see the blue line, which shows the interest rates from the Jan 2019 tranche. Looks like rates have fallen a fair bit. And if you hold this month’s tranche for 10 years, you would only make 2.08% p.a. Notice the sharp turn in the curves at the bottom right of the chart.

The lower SSB yields are caused by the Federal Reserve holding interest rates steady in their Jun 2019 meeting, with a likelihood of rate cuts to come within 2019. See the first few paragraphs of https://seekingalpha.com/article/4271959-lpl-financial-holdings-inc-managing-incoming-yield-compression for a quick explanation. So what are the implications?

  1. Mortgages. Homeowners, hope you didn’t fix your mortgage rates. Rejoice, those on floating interest rates! If you’re re-financing soon, do consider going for the 1M SIBOR pegged mortgages.
  2. Asset prices. The prices of any asset giving a somewhat decent yield have all been pushed up. One might have noticed the recent rally in the prices of bonds, REITs, and stocks. Perhaps it’s time to take some profits off the table?
  3. Hunger for yield. With SSB rates being the lowest in recent memory, the search for investments which yield higher is on. Do bear in mind that higher yields are never for free — it comes with commensurately higher risks! So do think twice before selling off your older SSB tranches, their yields should be looking relatively attractive now. Be very careful if an investment yields 10% or more, especially in today’s interest rate environment.

Geeky Footnote:
This month’s SSB data updates were completely automated! I was delighted to find a notification email coming in informing me that everything loaded correctly; I’ll enjoy it while it lasts as it rarely happens, as most programmers will know 🙂

I’ve also noted the new (still in beta) feature on Tableau Public, which allows you to edit your Viz directly in the browser, without having to start Tableau Desktop. This is rather handy, as I usually just wish to change which tranches are selected (checkboxes) for illustrating my points.

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